There has been much talk in recent years, although limited experience, about redirecting U.S. environmental policy from so-called "command and control" regulations to regulations that depend more on prices and market forces -- that give individuals economic incentive to do the "environmentally-right" thing. The innovations that are being advocated range from sharply-restricted use of market instruments, such as tradable permits or emissions charges, to more sweeping reforms seeking to restructure and privatize property rights with most or all decision-making taken out of the hands of government. This more radical view has sometimes gone under the rubric of "free-market environmentalism" and is well represented in the readings noted in Bibliography.
One class of regulations to evaluate encompasses mostly Western water and land use issues and common-property resources, such as fisheries. For example, recent efforts to amend the Endangered Species Act have examined ways to create incentives for private landowners to be good stewards of their lands. Another example is to "privatize" fisheries by assignment of Individual Transferable Quotas to individuals. A second class of regulations involves the use of non-conventional measures to deal with more traditional problems of pollution: for example, the use of tradable permits to tackle acid rain and to reduce smog and ozone in Southern California and Chicago in recently-instituted programs.
The goal of the policy conference will be to gain some overall assessment of the prospect and value of an increased use of the market in environmental regulation and to draw a "map" of the kinds of market strategies being considered and tried. The individual papers for the conference for the most part should not focus on economic theory, but rather explore how various regulatory innovations have been drawn up in practice, how they are being implemented, and what obstacles they face. Part of the task of the conference will be to determine exactly what focus the final report should take. We won’t look at global environmental problems (the oceans, ozone, global warming) or problems in other parts of the world (desertification, for example); but since Europe has experimented more than the U.S. in some of the areas we will want to explore, some analysis of initiatives there might be in order.
Organization of the Policy Conference
The plan is for each student to spend the first seven weeks of the semester on a research paper; and then for the group as a whole to begin to put together the final report. The report will be due in week 12.
In general, each paper is expected to be typically 20-25 double-space pages, with additional appendix material and references as appropriate. In a few instances, a longer paper may be necessary
Structure and Calendar
The structure and calendar will be set shortly after we meet for the first time. However, the overall schedule will follow closely that shown in the Policy Conference Manual. Notably, the individual papers will be due the end of week 7, the week after the midterm recess. The final report will be due at the beginning of week 12. Revised papers will be due by January 5, 1998. During the recess, I hope to arrange a two-day trip to Washington for those students who can make it.
Generally, we will try to restrict meetings to Tuesday and occasional Thursday evenings, although there may be a couple of exceptions. The first meeting will be on Tuesday, September 16 at 7:30 p.m.
The role of the seniors and the breakdown of the conference into subgroups will be decided at the beginning of the term.
Possible Topics for Individual Papers
Some of the topics below could be divided, and some of them could be reassembled in different ways, although the basic subjects should be covered one way or the other. Also other topics not listed here could be considered, especially given special student interests. One or two readings are suggested for each topic. And a wider set of readings, grouped somewhat differently, is provided in the Bibliography. The groupings of topic shown is very tentative.
Critique of Free Market Environmentalism
The basic idea behind free market environmentalism is to "get property rights straight" and then have the government as little involved as possible. For this to work, the property rights have to be enforceable and allow the common law system to operate so that those harmed can sue (or negotiate with) those doing the harming. So we need a critique of when such reliance on common law might make sense and when it probably does not make sense. This is a large subject and could be examined by more than one paper.
Symposium on Free Market Environmentalism, Harvard Journal of Law and Public Policy 15: 1992
Privatization of Common Property Resources
Under what conditions will private ownership of common property resources (say a forest) lead to optimal environmental stewardship, and under what conditions will such ownership lead to despoliation of the environmental resource (see, for example, the Clark article below on whaling)? This topic might lead to investigation of how to value environmental amenities, such as a standing forest, a wetland, an endangered species, etc.
Tom Tietenberg, Environmental and Natural Resource Economics, "Chapter 3: Property Rights, Externalities, and Environmental Problems."
Colin Clark, "Bioeconomics and the Ocean", Bioscience, Vol. 31, No. 3, March 1981.
Takings of Private Property
Many critics of environmental regulation, particularly the Endangered Species Act and regulations covering Wetlands, argue that the regulations often "take" value from a land holding without just compensation for the landowner. We need an evaluation of this "takings" argument and an assessment of the Constitutional limits to property takings by the federal government.
Jonathan Adler, "Property Rights, Regulatory Takings, and Environmental Protection", Competitive Enterprise Institute, April 1996.
Glen Sugameli, Takings Bills Threaten Laws that Protect Private Property, People, Public Lands and Natural Resources, National Wildlife Federation, November 1996.
Environmental Justice
Some command and control regulations appear to discriminate against the poor and disadvantaged. In this regard, will movement to market strategies improve the situation or, in fact, make it worse? In any case, what are the conditions or safeguards that will allow more use of the market without exacerbating problems of environmental justice?
Tom Tietenberg, Environmental and Natural Resource Economics, Third Edition, 1992, Chapter 20, "Pollution Control Policy: Distributional Effects".
Environmental Protection Agency, Environmental Justice Annual Report, 1996 (manuscript) -- available at http://lpd.uchicago.edu/users/rscho/ej.html [Other documents also available at this site].
Promoting Research and Development and Innovation
How can market incentives be used to encourage the development and commercialization of technologies that are low or zero polluting -- for example, photovoltaic solar cells or hydrogen-driven fuel cells for autos? The key to such incentives is that they do not reward economically inefficient technologies but rather somehow stimulate the market to allow innovations that could eventually stand on their own. This is an elusive topic, with probably a less-defined set of readings than most of the other topics noted.
UNDP, Energy After Rio: Prospects and Challenges, United Nations Publications, 1997, Appendix C: Removing Impediments. [Although this source was mainly focused on the issue of climate change, many of the policies that are discussed are more widely applicable].
Subsidies
Traditional and free-market environmentalists both argue that the federal government is in many areas effectively encouraging environmental destruction by providing subsidies to fossil fuels, to the U.S. sugar industry, to agriculture, and to other activities. This needs a critical appraisal.
David Malin Roodman, "Paying the Piper: Subsidies, Politics, and the Environment", Worldwatch Institute, Washington, D.C., 1997.
Many fisheries are in sharp decline through marked over-harvesting. One suggested remedy, which has now been implemented on a limited scale in various places, is to "privatize" the fisheries, through the allotment of Individual Transferable Quotas (ITQs). The ITQs would allocate to individuals (or corporations) a specified share of the total catch, and they would be transferable (so that one individual’s share could be sold to another). Under some schemes, the government would set the total catch allowed; in more radical versions, the shareholders would decide.
Terry Anderson and Donald Leal, "Fishing for Property Rights to Fish", in Taking the Environment Seriously.
Environmental Defense Fund, Achieving Sustainable Fisheries in America with Incentive-Based Limited Access Policies, January 1994.
Water Markets and Transfers
For the most part, water rights in the West have been based on a prior-appropriation doctrine, with relatively little use of water markets allowing transfer of water rights. But in recent years, there has been growing interest and experience in such transfers, including for environmental goals. The key here is to explore how water markets are being developed and whether they are being done or could be done in ways to benefit the environment.
Terry Anderson and Pamela Snyder, Water Markets: Priming the Invisible Pump.
Mark Reisner and Sara Bates, Overtapped Oasis: Reform or Revolution for Western Water, Washington, Island Press, 1993.
Ground Water: The Use of Tradeable Permits to Control Use of Aquifers
Ground-water aquifers, as other common-propery resources, can be overexploited. To combat this overexploitation, federal, state, and local governments have pioneered management schemes to control water pumping, including the development of a system of tradable groundwater property rights. The Ogallala aquifer (a non-renewable aquifer underlying the great plains) and the Edwards aquifer (a replenishable aquifer supplying San Antonio) provide some recent experience.
"Ground Water Deeds", Chapter 8, in Anderson and Snyder, Water Markets: Priming the Invisible Pump.
Public Lands: Forests, Grazing Lands, Pricing and Land Swaps
The federal government owns about one-third billion acres of rangeland in the West, some part of which is environmental decline. Analysts have suggested various reforms on how the land is managed, including the provision of economic incentives to encourage conservative grazing practices: Such incentives might include, for example, changing the ways grazing fees are fixed and managed, making grazing permits transferable to uses other than grazing, allowing actors other than ranchers to purchase permits, and permitting the federal government to "swap" land with private landowners.
Terry Anderson and Donald Leal, "Rekindling the Privatization Fires: Political Lands Revisited", in Terry Anderson, ed., Breaking the Environmental Policy Gridlock.
Gary Libecap, in Harvard Journal of Law and Public Policy, 15, Spring 1992
Jerry Holechek and Karl Hess, Jr., Market Forces Would Benefit U.S. Rangelands", in Forum for applied Research and Public Policy, Winter 1996.
Endangered Species Act and Habitat Conservation Planning
In recent years, the Department of the Interior has moved to provide incentives to private landowners to be good stewards of their land in the protection of endangered species. This has mainly been done through "habitat conservation plans" (HCPs) under which the stakeholders in some region agree on a conservation plan to protect endangered species. The incentive to private landowners is that the government provides "no surprises" or "safe harbors" guarantees to the landowners that once the HCP is agreed to and implemented they will not be subject to any new financial burdens. There are new bills being introduced in Congress to formalize the HCP process, and at least one bill which seeks to moderate no-surprises guarantees and replace them by other measures, such as the formation of trust funds and tax incentives.
Environmental Defense Fund, Rebuilding the Ark: Toward a More Effective ESA on Private Lands, 1997
See Too Hot to Handle?, Final Report of the Policy Task Force on the Endangered Species Act, Spring 1997, Woodrow Wilson School, Princeton University.
Emissions Trading -- Air
The use of tradable permits has been pioneered in the acid rain program and in a few more localized cases, notably the RECLAIM program in Los Angeles to reduce smog, a program now getting underway in Chicago to combaturban ozone and other pollutants, and in the ozone transport program in the Northeast. There is also the interesting case history of the drawdown of lead emissions, and a couple of instances of the use of market instruments in Europe. We need an analysis and critical evaluation of at least some of these programs -- and this may require two or three papers.
Daniel Dudek, Joseph Goffman, and Sarah Wade, "Emissions Trading in Non-Attainment Areas", in Kosobud and Zimmerman.
Jane Hall and Amy Walton, "A Case Study in Pollution Markets: Dismal Science vs. Dismal Reality", Contemporary Economic Policy, Vol. XIV, April 1996.
Water Pollution and Tradable Permits
Command and control regulation has generally failed to control "non-point" source pollution, such as runoff of pesticides and fertilizers from farms. Some free-market environmentalists believe that various market mechanisms could be adopted to deal with this so-far intractable environmental problem. This paper would try to evaluate such mechanisms, including the use of tradable permits.
"Community Markets to Control Agricultural Nonpoint Source Pollution", in Taking the Environment Seriously.
"The Solution to Pollution", Chapter 7, in Anderson and Snyder, Water Markets: Priming the Invisible Pump.
Transferable Development Rights
Under TDRs, a municipal, county, or state planning unit would place severe development restrictions on certain areas (for example, by downzoning the number of dwellings permitted per acre) while compensating the landowners for the loss in value of their land by allocating them TDRs which could be sold to developers in other areas in the planning region. This scheme has been tried in a few counties and in parts of New Jersey.
Alan Carlin, "U.S. Experience with Economic Incentives to Control Environmental Pollution", EPA, Section 5.
James Tripp and Daniel Dudek, "Institutional Guidelines for Designing Successful Transferable Rights Programs", Yale Journal on Regulation, Summer 1989.
Extended Product Responsibility
Europeans and others have experimented with assignments of responsibility for product disposal that would, it is argued, give incentive for key manufacturers to build products from the start in ways that will ease final disposal or recycling. The "key" manufacturer could be an automaker for example (say Mercedes Benz), the chemical companies responsible for the manufacture of plastics, or the manufacturers responsible for "filling" a container. How are these experiments working in practice and what are the issues to be understood in deciding how and whether to assign disposal responsibility to manufacturers?
Thomas Lindhqvist and Reid Lifset, "What’s in a Name: Producer or Product Liability?, Journal of Industrial Ecology, Vol. 1, Number 2, 1997.
Bette Fishbein, Germany, Garbage, and the Green Dot, INFORM, 1993.
President’s Council on Sustainable Development, Conference, October 21-22, 1996 [case studies in United States and Europe].
Toxics and Information Requirements
Proposition 65 in California requires manufacturers to list certain categories of toxics or suspected carcinogens in their product and in the manufacture of the products. Some allege that this has already led manufacturers to reduce their use of toxic substances, even where they are not required by law to do so. Can this information-requirement tactic be used more widely and how could this be done?
James Salzman, "Informing the Green Consumer: The Debate Over the Use and Abuse of Environmental Labels", Journal of Industrial Ecology, Vol. 1, Number 2, 1997.
Helias udo de Haes, "Slow Progress in Ecolabeling: Technical or Institutional Impediments?", Journal of Industrial Ecology, Vol. 1, Number 1, 1997.
Multiple copies of the following book have been ordered at the University Store, and should be read by everyone:
J. Clarence Davies and Jan Mazurek, Regulating Pollution: Does the U.S. System Work?, Resources for the Future, 1997 (paperback).
In addition, the University Store will have a limited number of the following (which will also be on reserve at library):
Terry Anderson and Pamela Snyder, Water Markets: Priming the Invisible Pump, CATO Press, 1997
Symposium on Free Market Environmentalism, Harvard Journal of Law and Public Policy 15, Number 2, Spring 1992
The first of these is an excellent and interesting set of essays by two strong proponents of "Free-Market Environmentalism". The second contains a series of comments and critiques of "Free-Market Environmentalism".
In addition, a few readings will be handed out the first day, including:
Environmental Law and Institutions, prepared by the United States for the United Nations Conference on Environment and Development in 1992.
Garrett Hardin, "Tragedy of the Commons" (Science, 1968). The classic essay about common property resources.
Thomas Schelling, "Prices as Regulatory Instruments", in Thomas Schelling, ed., Incentives for Environmental Protection, M.I.T. Press, 1983.
The latter is a very readable description about what economists mean by "using the market". This essay plus the book, Tom Tietenberg, Environmental and Natural Resource Economics (several copies of which are at WWS library), provide the principal economics background for the conference.
There is a lot of stuff on the internet. Below are a few sites, but there are many others that could be consulted:
npr.gov/library/index.html [Links to performance-based regulations]
npr.gov/library/reports/env.html [On environmental regulations]
epa.gov/docs [Environmental Protection Agency Reports]
thomas.loc.gov [On legislative information]
access.gpo.gov/ [Web site for House of Representatives]
lcweb.loc.gov/global/legislative/congress.html [On Congress]
house.gov/jec/ [Joint Economic Committee]
epa.gov/oar/otag/otag.html [Ozone Transport Commission]
fws.gov [Fish and Wildlife Service]
cnie.org [Committee for the National Institute of the Environment, including reports by the Congressional Research Service]
edf.org [Environmental Defense Fund]
nwf.org [National Wildlife Federation]
sierraclub.org [Sierra Club]
nrdc.org/field/state.html [Natural Resources Defense Council]
cato.org [CATO]
defenders.org/esapage.html [Defenders of Wildlife]
The development of bibliographies on specific topics will, in large part, be the responsibility of the students. However, to help get us going, several books and articles will be available in the WWS library. Most of these are listed in the attached bibliography.